View full sizeGus Chan, The Plain DealerThe Avenue District condominium tower at East 12th Street and St. Clair Avenue could become a rental property, after two-plus years of litigation. Only five units in the 10-story building sold before a foreclosure lawsuit stalled showings and sales in early 2010. Now a trio of local investors hope to buy the residential portion of the project. A Cuyahoga County judge is reviewing a proposed settlement agreement and sale of the property.

CLEVELAND, Ohio -- The days of empty elevators and choose-your-own parking spaces might be ending at the Avenue District condo tower in downtown Cleveland.

Two-plus years after a foreclosure suit stalled showings and sales at the 10-story building, local investors hope to buy the residential portion of the property and rent out the empty units.

If the group's plan succeeds, it could revive a dormant corner at East 12th Street and St. Clair Avenue and provide a swift solution for some would-be renters on apartmentwaiting lists around the city.

Only five condos changed hands at the Avenue District before a contractor filed to foreclose on the property. Since early 2010, the urban pioneers who bought into a downtown Cleveland dream have been living in a monument to the financial collapse. They've traded rumors about the building's future and shared stories about their lives, their dogs and their concerns.

Without neighbors to complain, they rearranged the artwork in the hallways. They did away with assigned parking spots long ago. And with only seven or eight people in the building, they're sometimes spooked when an elevator opens and someone's standing inside.

That's about to change.

Cuyahoga County court records show that developer Fred Geis, contractor Tony Panzica and property manager Timothy Zaremba hope to pick up the pieces of the failed project. The trio is offering $6.8 million for the empty condos, through a company called Avenue District Investors LLC. The 57 unoccupied units, once priced for sale at $240,000 to $1.2 million, would become rentals -- a product much easier to finance and fill than condominiums.

Being a rare owner-occupant in a rental building is not what Ellen Evans envisioned in 2009, when she and her husband paid nearly $500,000 for a two-bedroom condo with views of the city.

"The fact that the building will be filled trumps the fact that they're not all homeowners," she said, adding "I have no choice but to accept that. That's just the market the way it is."

A "50-something" empty nester who sold a house in Rocky River, Evans loves her condo, with light hardwood floors and custom blinds. She overflows with enthusiasm for downtown, where she helped start an advocacy group for residents. But she bought into the first phase of a planned neighborhood that never materialized.

Avenue District developer Nathan Zaremba, one of Timothy Zaremba's brothers, talked about filling several city blocks with 650 homes. That dream withered in the face of a construction dispute, a recession and a nationwide pullback on condo lending.

In late 2008, a waterline break on the building's seventh floor delayed the opening. And National City Corp.,a Cleveland-based lender on the project, was sold to PNC Financial Services Group Inc. of Pittsburgh.

Meanwhile, the housing market was sliding, dragging the economy down. Banks, shocked by foundering condo projects across the country, started asking buyers for higher down payments and more documentation.

At the Avenue District, 20 buyers disappeared. Evans and her neighbors, the few who hung on, moved in. Then the building slid into distress, after PNC ordered Panzica Construction Co. and a subcontractor to drop liens on the property or file a foreclosure lawsuit over unpaid, disputed bills.

In February 2010, Panzica initiated foreclosure proceedings. Other lenders, including PNC and KeyBank, jumped into the litigation.

By May of that year, a court-appointed receiver -- tasked with preserving value at the property -- stepped in to manage the condominium building. And the handful of homeowners started their long wait for a resolution.

"I think everybody, all of a sudden, found ourselves in a situation that nobody expected and nobody knew what to do with," said Lawrence Carter, who lives on the fourth floor of the building with his partner, Kevin Schmotzer, and their three pugs, Roo, Nemo and Bitzy.

"Luckily for Kevin and I, we're in Cleveland and have no plans of ever moving. We both love Cleveland. So for us, it's like, all right, we may be in the condo longer than we intended. So we'll just wait and see what happens."

In February, Common Pleas Court Judge John P. O'Donnell acknowledged the developer's default on the condo tower and gave the lenders a green light to foreclose.

On June 8, receiver Michael O'Donnell -- who is not related to the judge -- filed a motion outlining a potential settlement and sale to bring the building back to life. The judge is considering that proposal and could decide on it at a June 29 hearing.

Under the deal, Avenue District Investors will buy the residential part of the building and pay approximately $280,000 in delinquent property taxes and fees.

Everyone is being cautious until the deal is final, said Tony Panzica, the president and chief executive officer of Panzica Construction Co. in Mayfield.

"We feel that there's a market for apartments right now in the Greater Cleveland area, and that's why we're undertaking this project," he said. "There are five residents that have purchased those condos. The rest of the building would be rented as apartments until, or if, the condo market comes back."

Key, which lent $15.5 million for the project, and PNC, which took over a $12.2 million loan, will split money from the residential sale.

Nathan Zaremba, through a new company, will take back and try to fill the ground-floor retail space. Now vacant and boarded up, that part of the development carries a $2 million loan from Cleveland Development Advisors, an affiliate of the Greater Cleveland Partnership.

The lender plans to stay in the project, after getting back some unspent construction money and restructuring its mortgage.

"The developer is going to pay for the build-out himself," said Dean Parker, vice president of finance and investor relations for Cleveland Development Advisors. "We wanted at least some paydown. . . . We're hopeful, but we're probably not going to see our investment returns."

An attorney for Nathan Zaremba declined to comment.

Receiver O'Donnell also asked the judge to approve foreclosures on two parking lots, which were slated for later phases of the Avenue District before the recession. Those surface lots, east and south of the condo building, could be sold at sheriff's auction this year. Money from the sale would go toward paying off a KeyBank loan on the properties.

The city of Cleveland, which sold land to Nathan Zaremba to spur residential development, declined to comment.

Evans and her neighbors are hoping for closure. They're anxious for the attention of a full-time property manager, supported by a full building, instead of a court-appointed receiver on a tight budget. Bringing in more people heightens the potential that their stretch of St. Clair, stripped decades ago by urban renewal, eventually will become the neighborhood they saw on posters and marketing materials.

But the tight-knit club of condo-owners will still stand out in the building, which they hope won't be filled with renters forever.

"I know it will be high-end rental," Carter said. "We don't have fear of it becoming a party palace. . . . If they do rental that goes into condo, we're probably going to be fine. But if they stay rental, I don't know how we're ever going to be able to sell our place. That's the scary part for us, when you're sitting on a $300,000 investment."

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